Going through bankruptcy and foreclosure will not entirely rule out purchasing a home sometime in the future. There are certain requirements that you must adhere to. Below, we provide a basic understanding of how quickly you can purchase a home following foreclosure and bankruptcy in Dracut MA.
Buying a Home Following Foreclosure
A foreclosure coincides with defaulting on a mortgage. Thus, it makes sense that you should not be in a position to directly buy another piece of real estate. Another lender will not believe that you will stay current on another mortgage. For conventional mortgages, there is a seven year waiting period for approval on another mortgage. FHA mortgages have a lower 2-3 year wait period. There are also special programs, such as the FHA Back to Work Program that requires only a one year time frame.
The waiting period is only one of several underwriting qualification rules. During the wait timeframe, it is critical that you take steps to increase your credit score. This includes submitting payments on time, not keeping large balances on your credit cards, not having any accounts submitted to collections, etc. Most lenders require certain FICO scores for approval and the foreclosure likely reduced your score dramatically. These practices will both substantiate your deserving of new credit and increase your score.
Purchase A Home Following Foreclosure and Bankruptcy
If you was foreclosed AND you completed a bankruptcy, there are two different waiting periods. Normally, whichever waiting period is longer will apply. However, if the foreclosed home was included in the bankruptcy (and the lender successfully confirms that), then you can take advantage of a shortened timeframe. For conventional mortgages, that would be four years (instead of 7).
Determining How Quickly You Can Purchase A Home Following Foreclosure And Bankruptcy In Dracut MA
All of this can be a bit confusing. Contact a loan officer to determine which category you fall into. If you are past the waiting period, the loan officer can complete a pre-approval. If you do not meet the requirements at the moment, your loan officer may recommend ways to improve your situation.
What you should take from this article is that is that it is possible to purchase a home despite having a foreclosure and bankruptcy. Waiting periods apply and can vary based on the loan program you are applying for. There are also certain programs that will shorten that waiting period. Qualifications and offerings do change over the years, so your loan officer is normally your best reference for the most update to date information.